Gasoline shipments to the U.S. from Europe are poised to drop in April to the lowest in four months, reinforcing speculation that a surge in pump prices is hurting consumption in the world’s biggest oil user.
At least 15 tankers were scheduled to ship 570,000 metric tons of the fuel to the U.S. Atlantic Coast from Europe as of April 20, the least for a comparable period since December, according to Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.
“The main downside risk on gasoline remains the demand erosion or destruction risk as gasoline prices at the pump are starting to average $4 a gallon before the start of the driving season,” Olivier Jakob, managing director of Switzerland-based consultant Petromatrix GmbH, said on April 25. “The U.S. driving budget is double what it was in the spring of 2009.”
A decline in imports at a time when motorists normally start taking to the roads for summer vacations underlines concern that demand is falling, limiting export opportunities for European refiners, including Total SA, the largest in the continent, and energy traders such as Morgan Stanley. The International Energy Agency on April 12 said that swelling fuel costs are eroding growth in the world’s largest economy.
Profit from buying gasoline in Europe and selling it in the U.S. shrank to the lowest in six weeks to 9.15 cents a gallon on April 21, a 39 percent decline from this year’s peak at 15 cents on Feb. 28, data from London-based brokerage PVM Oil Associates Ltd showed. The gap was at 9.4 cents yesterday.
“With oil prices so high, people will certainly drive less,” James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, said April 19. “There will be demand destruction.”
U.S. consumption of the motor fuel is likely to average 9.3 million barrels a day this summer, rising 0.5 percent, or 45,000 barrels a day, compared with last summer, the U.S. Energy Department said in its summer fuels outlook report on April 13.
“Our forecast calls for modest growth in motor gasoline and distillate fuel consumption, reflecting both continued economic growth and the restraining effects of higher crude oil and product prices compared with last summer,” according to the Department.
Imports fell 224,000 barrels a day, or 21 percent, to 853,000 barrels a day in the two weeks to April 18, according to Energy Department data. The volumes are forecast to average 630,000 barrels a day through Sept. 30, a drop of 70,000 barrels a day from last summer, the department said.
“U.S. gasoline demand has so far shown the clearest indications of the impact of high prices on consumption,” David Wech, head of research at Vienna-based consultant JBC Energy GmbH, said in a note April 26. “Amid concerns about the health of U.S. finances and the path of the global economy, consumers might reduce non-essential travel.”
Returns from the transatlantic trade also eroded as supplies dwindled in Europe, pushing benchmark gasoline to a record high in the Amsterdam-Rotterdam-Antwerp, or ARA, oil hub. Eurobob grade traded as high as $1,130 a ton yesterday, the most since the contract was introduced in 2010.
Refinery shutdowns reduced stockpiles of gasoline held in independent storage in the ARA-region to 644,000 metric tons in the week to April 21, the lowest since Dec. 30, according to data from Netherlands-based researcher PJK International BV.
Gasoline’s crack, or premium to crude, will likely stay capped in Europe even as refiners undertake spring refinery maintenance, analysts including Peter Stewart at KBC Advanced Technologies Plc, a researcher based in Walton-on-Thames, England, said in an April 11 note.
“Ample refining capacity means gasoline cracks should stay in single digits through the period of peak demand,” KBC said. “As a result, although some seasonal improvement in margins from spring into summer is anticipated, it is likely to be modest.”
The motor fuel’s crack in northwest Europe was at $9.14 a barrel today, up 11 percent since April 1, PVM data showed. In the U.S., the spread was at $26.41 a barrel yesterday, and is higher than its European counterpart due to the cheaper cost of West Texas Intermediate crude relative to North Sea Brent.
Gasoline futures for May delivery rose 3.43 cents, or 1 percent, to $3.3572 a gallon yesterday on the New York Mercantile Exchange. The national unleaded average gasoline price rose to $3.869 a gallon on April 25, according to AAA.
© Copyright 2016 Bloomberg News. All rights reserved.